Free use of patented technology?  Caveat emptor.  In a June 12, 2014 blog post titled, “All Our Patent Are Belong To You”, Elon Musk, co-founder and CEO of Tesla Motors Inc., pledged that the company will not “initiate patent lawsuits against anyone who, in good faith, wants to use our technology”, purportedly making Tesla’s entire patent portfolio (over 500 patents and patent applications) freely available for use by anyone.  Given the multi-million dollar patent lawsuits in the news, is it advisable for those interested in using Tesla’s patents to rely on Musk’s pledge?

Other Patent Pledges

Patent pledges are promises made by patent holders that they will not enforce their patents if certain conditions are met.  With varying scope, several companies have, like Tesla, issued patent pledges. In practice, patent pledges have yet to be tested in court.

Red Hat Inc. issued a pledge on its website to refrain from enforcing its infringed patent rights with respect to its open source freeware.  Red Hat’s patent pledge did not extend to its non-open source freeware, its hardware patents, or to parties who institute litigation against Red Hat.  IBM also issued a statement of non-assertion pertaining to a list of 500 U.S. patents.  IBM stated that it intended this non-assertion pledge to be legally binding and enforceable by any open source software developer. Google made an open patent non-assertion pledge to abstain from initiating a lawsuit or other legal proceeding against any developer, distributor or user of any of its free and open source software patents. Although intended to be legally binding and irrevocable, like the Red Hat and IBM pledges, Google reserved the right to terminate its pledge with respect to any third party initiating an infringement suit or other legal action against Google or entity controlled by Google. The Google pledge also included a statement that Google would require any person or entity to whom it sells or transfers any of the pledged patents to be bound by the pledge and place a similar open source pledge requirement on any subsequent transferees.

Tesla’s Patent Pledge

Elon Musk’s statement warrants serious consideration for those wanting to use, develop, or build upon Tesla’s patented technologies.  It is important to recognize that Musk’s pledge was delivered by means of a blog posting on Tesla’s website. This may or may not constitute an enforceable contract.  As mentioned above, since patent pledges such as those made by Red Hat, IBM and Google (which were all issued via similar online statements) have not been tested in court, the enforceability of these pledges is not yet determined.

Musk’s pledge uses general language and is open to a significant degree of interpretation. Unlike IBM and Google’s pledges, Musk’s statements do not indicate that there is an intention for his representations to be held as legally binding or irrevocable, meaning Tesla may be able to withdraw or change its “open source” patent policy at any time.  Furthermore, whereas Google pledged to require subsequent transferees of its specified patents to adhere to the terms of its patent pledge, Musk made no such assertions. Therefore, even if Tesla remains committed to its patent pledge, its patents can be sold or assigned to third parties who may choose to enforce the full complement of their entitled patent rights. 

Musk’s pledge additionally sets the ambiguous condition that parties wanting to use Tesla’s technology must do so “in good faith”. Would the use of Tesla’s patents in the context of a gasoline or hybrid vehicle be in “good faith”?  Companies should approach the use of Tesla’s patents with some caution to ensure that the manner in which they seek to employ the patent falls within the ambit of Tesla’s seemingly discretionary definition of use in “good faith”.

Finally, in considering the use of Tesla’s “opened” patents, it may be of benefit to consider the unique position that Tesla maintains in the electric vehicle market. Some initial reactions to the blog post were that Musk’s patent pledge was made as a self-serving marketing device rather than as a genuine act of charity. As electric vehicles comprise only a small percentage of the estimated two billion cars globally, analysts regard Tesla’s move towards opening its patents as a way of generating competitors to help grow the electric vehicle market and make electric vehicles more ubiquitous. To maintain its competitive lead, some have speculated that Tesla has not patented all of its technologies and that its most important technologies are protected as in-house trade secrets. Musk’s pledge is also contemporaneous with Tesla’s announcement of its “Gigafactory” which aims to reduce the costs of producing lithium ion cells and produce more lithium ion batteries annually than produced worldwide in 2013. Therefore, even if competitors use and copy Tesla’s pledged patents, Tesla would already have the infrastructure in place to sell competitors its batteries.

Conclusion

Though Elon Musk promised to refrain from initiating legal action against “good faith” users of its patented technology, the enforceability and applicability of his pledge remains uncertain. Interested parties seeking to use Tesla’s “open source” patents should approach their “free” adoption with careful consideration. While Tesla may indeed be committed to the acceleration of sustainable transport technologies, it is prudent to bear in mind that Tesla’s motivations for pledging its patent portfolio may not be entirely altruistic. Tesla’s pledge may provide scarce protection from subsequent litigation to those relying on its representations and having invested significant time and cost in using Tesla’s patents.

Author

Michael J. Damiani 
MDamiani@blg.com
604.632.3413

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Richard Johnson

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Intellectual Property